October 23, 2023

European Commission expresses concerns on non-EU Citizenship Programs with Visa-Free Schengen Access

The European Union may restrict visa-free travel for citizens of non-member states that offer citizenship to investors, grants visas and residence permits.

In a recent report, the European Commission (EC) has expressed concerns about the security risks posed by investor citizenship schemes operated by visa-free third countries, which could enable nationals of other visa-required third countries to circumvent the EU short-stay visa procedure. To address these concerns, the EC has revised the suspension mechanism for visa-free travel, which allows the temporary reintroduction of visa requirements for third-country nationals in case of migration or security risks. The EC has also monitored the compliance of visa-liberalized countries with the benchmarks for visa-free travel and citizenship policy. These actions could have significant implications for non-EU countries with citizenship-by-investment programs that enjoy visa-free Schengen access and which commercially promote such programs as providing visa-free Schengen access. report specifically includes Vanuatu and the Eastern Caribbean states (Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, and Saint Lucia). That being said, such measures could also apply to other EU-neighbour states that have offered or are still offering some kind of program. that have visa-free Schengen access.

The initial revised suspension mechanism for visa-free travel was adopted by the EU Member States and the European Parliament in June 2018, following the European Commission’s proposal in December 2017. This mechanism strengthens the power of the EU to react to sudden or serious risks to public policy or internal security related to non-EU states with visa-free access.

One of the matters that prompted the current revision of the suspension mechanism relates to concerns about the increasing number of non-EU states that offer investor citizenship or residency programs, which enable individuals to acquire a new nationality or residence status in exchange for certain investment or donation, and proof of a genuine link to such jurisdiction These programs have raised concerns about security, money laundering, tax evasion, and unfair competition, as well as about their compatibility with the values and principles of the EU, such as the rule of law, democracy, and human rights. The EU has repeatedly called on non-EU states to abolish or restrict such programs and has cautioned that they could affect the visa-free travel regime that applies to some non-EU states. The EU has also asked visa-liberalized non-EU states to ensure the integrity and transparency of their citizenship policies and to avoid granting citizenship by investment systematically or without due process.

The monitoring of visa-liberalized non-EU states with citizenship by investment programs is part of the regular reporting by the European Commission on the functioning and implementation of the visa-free regime with third countries. The latest report covers the period from May to November 2021 and assesses the compliance of eight visa-free states from the Western Balkans, the Eastern Partnership, and beyond, with the benchmarks for visa-free travel and citizenship policy. The report praises the progress made by some of the states, such as North Macedonia and Georgia, in addressing the concerns related to security, the fight against organized crime and corruption, and visa policy alignment with the EU. However, the report also highlights the persistent challenges posed by citizenship policies that do not respect the principle of genuine links, that lack transparency and scrutiny, that grant citizenship without actual residence or language skills, or that do not provide for effective naturalization revocation in case of fraud, misinformation, or criminal convictions. The report urges non-EU states with citizenship by investment programs to phase them out or limit their use and encourages the EU to consider the operation of such schemes as a ground for the suspension of visa-free travel, by the revised mechanism.

The scrutiny of Malta’s citizenship by investment program by the EU Commission at the European Court of Justice is another example of the EC’s concerns about how investor citizenship schemes could undermine the integrity and trust of the EU citizenship and migration policies. The EC opened an infringement procedure against Malta in July 2020, and referred the case to the European Court of Justice in April 2021, alleging that Malta violated EU law by granting citizenship to persons who did not have genuine links with Malta or the EU, and by failing to coordinate its citizenship policy with other EU member states. The EU Commission claims that Malta’s citizenship by investment program poses a security risk, as it enables individuals with questionable backgrounds or intentions to acquire EU citizenship and travel freely within the Schengen area, without undergoing the thorough scrutiny and background checks required by the EU rules. The EU Commission calls on Malta to align its citizenship policy with the EU values and standards and to stop granting citizenship by investment until the legal and factual issues are resolved. The Government of Malta has been actively addressing the EC’s concerns and Malta’s current Citizenship for Exceptional Services Regulations subject applicants to a 4-tier due diligence process that requires full disclosure of the source of funds and wealth, as well as being required to satisfy a minimum period of residency before any application for citizenship is submitted.

In summary, the EC’s actions regarding the revisions of the suspension mechanism for visa-free travel and the monitoring of citizenship policies could have significant implications for non-EU states with investor citizenship schemes. Non-EU states that offer visa-free Schengen access and citizenship by investment should be aware of the risks and requirements of the revised mechanism and the benchmarks and should take measures to address the concerns of the EU and ensure the legitimacy and integrity of their citizenship policies. The EC, in turn, should ensure that its actions are proportionate, fair, and effective in achieving the legitimate objectives of the visa-free regime and the EU citizenship and migration policies while respecting the rights and interests of all parties involved. The EC should also engage in a constructive dialogue with non-EU states on the issues of investor citizenship and citizenship by investment, and work towards a global approach that promotes responsible and ethical citizenship policies.

If you would like to assess your situation in terms of Schengen visa access, or if you are unsure whether this news could impact you or your clients in any way, feel free to schedule a call with our team to discuss the specifics of your case. Dr Russell Attard Baldacchino is a Maltese Advocate, warranted to practice law in the Republic of Malta, and licensed agent AKM-BALD by the Community Malta Agency and the Residency Malta Agency. He is also an Authorised Registered Mandatory by the Malta Commissioner for Revenue, and a member of the Malta Chamber of Advocates and the Malta Institute of Taxation.

This blogpost is being published strictly for informational and educational purposes, and should be correct and accurate at the time of publication. The content of this publication should not be considered as formal legal, immigration, or tax advice.